There are an estimated 30,000 Australians living and working in Dubai, Abu Dhabi and other United Arab Emirates (UAE), and not all of them have gone there with their eyes wide open.
Sean Abbott, a planner based in Neutral Bay on Sydney’s lower north shore, has just spent a week in the Middle East, meeting expats and immersing himself in the lifestyle and culture of the region. Abbott is in the finishing stages of defining an advice offering that caters specifically to expats – or “outbound Australian executives”, to use a more up-to-date term – assigned to the UAE.
The offering is the culmination of a realisation by Abbott about two years ago that the needs of executives in the region are highly complicated, and quite unlike the demands and needs of domestic executives. Abbott has defined a target market whose wealth management needs cut across international borders and cross over cultural barriers.
He acknowledges that his advisory firm, Aqua, can’t be the expert in every area, and so while he’s positioning Aqua as a focal point, he sees the firm’s role more as a project manager.
“We’re what I call the principal wealth adviser – the one throat to choke,” Abbott says.
Abbott’s week-long fact-finding tour has helped him to identify the key financial needs of expats, as well as refining his thinking on some of the nonfinancial needs that have the potential to affect a family’s financial wellbeing.
For example, he says it’s a commonly observed phenomenon that if a family moves overseas, it’s often the working partner who settles in most quickly and is happiest.
“There’s one area that I can’t over-emphasise, and that’s the adjustments that have to be made by the non-working partner and children,” Abbott says.
“What tends to happen is the working partner – and sometimes it’s the wife who takes that role and the husband who takes the back seat – is in an environment where they’re working with colleagues with the same skill set, doing what they love and earning good money, while the non-working partner and children have uprooted themselves.
“We’ve learned that when the husband and wife are sitting across the dinner table in those first few weeks and months, they can have very different feelings.”
Abbott says one of the aims of the advice offering will be to remove the need for the working partner to focus as closely on financial issues as they otherwise might, giving them more time to spend with the family and help them all settle in.
“Our value proposition is to free [them] from a lot of the financial decisions that need to be made, so that the working partner can be involved in the family decisions,” Abbott says.
Dealing with some of the purely financial issues will be challenging enough as it is, and has required Aqua to develop specialised in-house expertise and contacts with experts in the field. For example, Abbott says, estate planning under Sharia Law is almost completely unlike estate planning under Australian law.
Assumptions that we might make about how a wife is treated in the event of her husband’s death do not necessarily hold true in other cultures.
Abbott says a typical Australian executive living and working in the UAE is aged mid-30s or older, has a family, is financially comfortable and earning a good income in Australia, and can be earning as much as $300,000 a year, tax-free (not counting short-term incentives and other allowances) during a three- to five-year stint overseas.
Abbott says he expects most clients to be involved in the construction or aviation industries. Aqua’s fees range from $10,000 to $15,000 in the first year “and that’s for everything – that’s the actual planning document and complete implementation over a 12-month period, with no commissions received by us”.
The fee scales down considerably in subsequent years, reflecting the fact that most work occurs at the outset.
While any clients Aqua attracts overseas will be new to the firm, Abbott hopes a relationship can be maintained after the executives return to Australia where, he says, their financial planning needs are likely to be relatively straightforward. Abbott, a former futures trader, got into financial planning about 10 years ago after reading an advertisement placed by Lend Lease Adviser Services (LLAS).
“When I explored what a financial planner was, and what strengths were required, it really appealed,” Abbott says. It was the “generalist” nature of financial planning – as opposed to the highly specialised world of futures trading – that was the clincher. And the fact that the job required very high interpersonal and communication skills was also a drawcard.
Abbott spent two years with LLAS before moving to a boutique firm.
“And then in 2000 I made the decision to go out on my own. That’s when I set up Aqua. And that coincided with the birth of our first child,” he says.
Aqua shifted from its original North Sydney location to Neutral Bay about a year ago.
“My original plan was to have a practice where I had a reasonable amount of support around me, but I had no plans to build a business beyond a single-adviser business,” Abbott says.
“Lifestyle was the objective. I really enjoy advising, but I was being pulled away from [giving] advice. “It was from going through the SCAT [Strategic Consulting and Training] ‘Culture of Advice’ program that [SCAT founder] Jim [Stackpool] challenged me on that.”
Abbott says he immediately “changed tack from that point, and branched out”, bringing in an associate adviser, putting on full-time support staff and bringing paraplanning in-house.
The aim was to corporatise the business as much as possible, to “take everything out of my head and [put it] into a system”, based on the belief that this structure was the only way to put the practice on a sustainable footing and tackle the market he had in mind.
It was a good 12 months before the benefits began to be revealed.
“It was the classic ‘wobble stage’ theory,” Abbott says. “We went backwards at first.”
Part of the SCAT process requires a practice to identify a niche market for its services. Abbott wrote a white paper setting out his thinking on how to service “international assignees” (IAs).
The idea was not completely foreign (as it were), because two of Aqua’s existing clients had accepted international assignments, and Abbott had found himself on “a very steep learning curve, getting to understand what was required”.
“I realised it was highly complicated, and the typical executive who is accepting these roles has a high degree of complexity in their financial affairs, and they are typically time-poor,” Abbott says. “They need a high-trust relationship.”
Abbott’s white paper, called Cleared for take-off: Ensuring smooth flights for international executives, concludes that “with the right advice, strategies can be put in place to ensure IAs spend more time enjoying the overseas posting and less time worrying about whether their finances are properly taken care of ”.
He says it’s common for expats to go a bit mad when they realise how much money they’re earning and that they’re (often) paying no tax on it. But he says Aqua has no intention of being the fun police.
“For some people, the licence to go wild may extend to three months or nine months, but some may take two years before they pull the reins in, and some never will,” Abbott says.
“The advice framework for the client is clearly based on understanding their values.”
Abbott says other firms have identified the expat market as a potential target.
“One of our challenges is that we’ve learned of … unsolicited phone calls from ‘financial planners’ coming from [places like] the Channel Islands, saying, ‘We can tell you where to put your money’, and flogging product,” Abbott says.
“We have got to demonstrate that our offer is different to that.”
But even though the expat community is growing, it’s still “like a small country town in some ways”, Abbott says.
“Good news travels,” he says.